All Forum Posts by: Mitch Messer

@Zachary Phelan 

Since you're planning to purchase subject to (Sub2) the existing financing, I'd only urge you to carefully review their mortgage statement ASAP. The quality and nature of that underlying loan is the key to this deal.

It still doesn't sound like you're getting the whole story. If they've really got nearly $100K in equity, I wonder why they wouldn't just get a home equity line to cover the medical bills?

You need to know about all the liens on the property, so you're definitely going to want to have title pulled. We've had Sub2 deals get days away from closing only to discover a second mortgage the seller "forgot" to mention.

That said, if everything is as it seems, this sounds like a great deal: You'd be buying a home appraised at $218 for $165K ($45K cash + $120K financing)!

Good luck and let us know how it turns out!

Hi Zachary,

I do have some thoughts, but I wanted to clarify three quick items first:

• When you say "Seller put 30k into it," do you mean as a down payment, or as repair expenses? I ask because...
• If they did put $30K down, are you certain about their current loan balance? Unless they made a ton of additional principal payments, it's hard to see how they could go from $169K to $120K in two years. Lastly...
• Does the $837 monthly loan payment include escrow for taxes and insurance?

I probably am missing some key pieces of info, so before going too far, I wanted to make sure I've got the facts straight.

Thanks!

Hi Chirag,

First thing I would do is get that puppy under contract! I've learned the hard way that "you can't steal in slow-motion!"

Then, given your limitations in time and finances, I'd wholesale it. If you are lucky, you'll find a flipper who'll then let you look on once they close. You'd get paid, you'd make a great contact, and you'd get a chance to see the rehab process up close.

As you point out, at this stage the real value is in the learning, not the money. 

Hey Hunter,

Here's my favorite thing to ask myself every day for every real estate deal that I come across (with all credit going to the great Pete Fortunato): What would I have to do to make this deal work for me? In other words, how many ways can I come up with to make into this a great deal?

Do that for every deal you see, and then check your answers with more experienced investors. You'll be amazed how fast you'll get up to speed! 

Hi Neomi,

No need to be skeptical, necessarily. Depends on what they are suggesting and on who controls the deal. 

When we propose a co-wholesaling arrangement, we typically (as the primary wholesaler) have a contract with the seller. We'll work with another wholesaler (the secondary) who brings us a buyer. If the deal gets done, we'll split the wholesale fee (often 50/50) and everyone is happy. We're in control, so we can ensure things go as expected. 

The problems can arise when you are the secondary and the primary gets greedy and shortsighted and tries to stiff you on the fee. Without the direct relationship with the seller, you're at the mercy of the primary. 

So, if your primary is reputable and other wholesalers can vouch for them honoring the co-wholesaling agreement, you should be fine. If not, I'd pass.

Good luck!

Hi Keith,

In addition to those questions, I'd also want some idea of their financial requirements. For example:

• What minimum rental yield are you looking for? (If buy-and-hold.)
• What minimum back-end profit do you need? (If fix-and-flip.)

That way, you have some sense of whether the deal could possibly fit their objectives before you begin negotiating with them on price. No sense butting heads if even your best offer won't work given their cost model.

I'm sure there are plenty more, but these two have proven particularly useful for me!

Hi Dan,

We've been using SmartMove for about three years now. We require all interested lease-purchase applicants to sign up with them and we use the credit and criminal reports generated to make our decision. Before that we used a paper app form that was faxed or mailed in. We would pull credit ourselves. 

Here's what we like about SmartMove:

• The applicant does all the upfront work and pays the fee. 
• It can be done entirely online, 24/7. We've had folks go online to apply on the ride home from viewing the home. 

Here's what we don't like:

• Their online portal is a bit clunky, particularly for multiple users of a single account.

We largely ignore SmartMove's recommendations about accepting/rejecting applicants. We still do our own verification of rent and collect applicant paystubs.  We are receiving no compensation for this posting (not that we'd be opposed to that!). 

Hi Clifford,

Are you looking for RTO properties offered by "civilians" (i.e., not investors), or properties offered by companies that specialize in this type of deal?

In my experience, most non-investor "regular folk" have no idea how to offer RTO. It sounds scary and risky, so they don't bother.

There are plenty of investors/companies that offer RTO (or lease-purchase or lease-options). If you search Google for "Rent to own " you should find plenty.

Happy hunting!

Hi Ken,

There are probably agreements you could execute with the wholesaler that might protect your interests, but in order for them to offer you any real protection they'd need to cloud title, which is something neither the seller nor the buyer would want. For a larger fee, you might insist, but not for $1K

Wholesaling runs on repeat business. I think the real question is whether you have good reason to believe this wholesaler will screw you out of a $1K fee. If they do, you've learned a valuable lesson and won't ever work with them again. But, if the wholesaler and your buyer see you as adding real value, they'd be nuts to trash that relationship over a measly thousand.

Can you check with others who've worked with this wholesaler?

Hi Kamia, welcome aboard!

You are wise to soak up as many of the free resources as you can. There is an abundance of solid, useful information on this forum and others.

My strong recommendation is that you do consider wholesaling as your primary gateway into the world of real estate. The main reason is that the barriers to entry are low enough (and the risks small enough), that you can jump right in and start transacting. Trying to begin by rehabbing or landlording can be so scary and intimidating that many never get started at all!

And that's a shame, because the key to real estate investment success is getting better at transacting: It's about searching for a deal, recognizing a deal, getting agreement, getting it under contract, getting paid, and then doing it again, only better next time. 

Do learn what you can, but my recommendation is to begin transacting as early as you can!